Too Much Tech?!
Real Solutions vs. Manufactured Problems
Sometimes it feels like there are so many new apps coming at me all the time, it’s hard to keep up.
“OMG, have you heard about Flipperdigibbit?! I’m running my entire business off of it!”
I feel like it’s very important for me to stay ahead and know what’s out there, what’s coming, who is working on what technology and the general direction of it all.
I enjoy it. I write about it. I use it so you think I’m an expert at something. And I also see opportunity and broken things and I’m building my own solutions.
With such great potential – and an ever-decreasing number of problems to solve – entrepreneurs seem to be finding or creating marginal problems in the name of starting a business. Their sales pitches are focused on convincing you that you have an issue instead of targeting a pain you already know you have.
A patient lifts her arm over her head and says, “Doctor, it hurts when I do this.” The doctor says, “Then don’t do that!”
– Henny Youngman
I spend most of my time with an audience of people that buy and finance real estate professionally, and that’s where I focus my attention: on their pain and problems.
As our solutions are evolving, I probably shouldn’t be too transparent about what I think those problems are, but I’m going to anyway.
Real estate in general stayed way behind the movement of ‘technology to solve problems’ for years and of course it’s a major industry – annual sales over $11 Trillion in the U.S. alone – so it’s no wonder there seems to be a pile on of apps and software.
Commercial sales, residential consumer sales, small commercial investments, commercial financing, residential conforming financing, property management, portfolio management. There are a lot of different segments considered ‘real estate’. But when I break some down, I find that the industry looks a lot smaller than what you might think of $11 Trillion a year.
Take residential real estate in general. In the U.S. as of May 2017:
- There are approximately 2 million licensed realtors (which, by the way, is almost doubled from just 2014).
- Only about 129,000 (~15%) of them are actively practicing at all.
- 88% of all practicing agents do less than 10 transactions per year.
- 60% do less than 5 total transactions per year.
- Only 2.5% of them do more than 30 transactions per year.
- .02% do more than 100 transactions per year.
When you do the math, that’s fewer than 50,000 realtors and agents that are producing enough volume to justify paying for tools, technology, and applications, not to mention traditional real-world tactics. That’s a seriously niche business when you look at it that way. Yet, there are now thousands of companies clamoring to sell ‘solutions.’
Here’s where I think the solutions are still weak and still not solving problems as much as they could be: lead generation and deal flow.
The nature of lead gen has changed dramatically in the past 10 years. Look at residential.
Residential lead generation has gotten really hard. Before Zillow and before the MLS, if you wanted to buy a house, you had to call a ‘broker.’ Your ability to look at pictures, understand pricing and shop without another human being was extremely limited and very time-consuming.
Picking up the phone was generally step one in the sales process or was at least early in the process. So, at the top of a realtor or broker’s sales funnel, people were serious and ready to commit time to looking for a house to buy.
Before the year 2000, the average sales cycle for residential consumer real estate was 6 months.
Today’s residential sales cycle is 2.7 years!
From the time someone first starts kicking tires on the internet and becomes a realtor’s ‘lead’ until settlement. I’ll bet it takes less time for American Airlines to shop and order a fleet of Boeing jets for billions of dollars.
That consumer becomes a prospect for an average of 3.5 different realtors along the way and begins looking long before actually being ready and serious about buying.
So, there are many more leads flowing, but that simply means the top of the funnel is much wider. Competition is much higher, and you have to remain ‘top-of-mind’ for a lot longer. Like, years longer.
The tools that exist today like Zillow, endless CRMs, and other lead capture sites and software increase the flow of leads and manage the enormous amount of contact you have to maintain with prospects. They help you manage the huge number of fish in your net, but you’re still fishing with a giant net and therefore catching a lot of junk. Most software and applications today are helping manage junk in your net.
I maintain that a huge problem to solve is the size of the net.
I’d rather focus on reducing the junk. Fishing with a rod is just too slow, but what about sonar?
It’s become so easy to shop for real estate online that the pool of those that are considered ‘leads’ has become diluted. If your job is to make deals happen, you want to talk to the most motivated and serious people out there. You want to find them first, before anyone else does. You want to go way up the food chain.
You want to find out when life circumstances happen to people, the types of circumstances that make them buy and sell real estate.
When people get divorced, when they get married, are having kids, lose their job, start missing bills. These are just a few simple examples; life circumstances are often the root cause of action. If you knew when and who, you would certainly have the best lead generation ammunition on the planet.
Quick fixes are usually too tempting and too good to be true. If you want to separate the real and fake when it comes to problems and solutions – or if you want to turn rationalized market data into real-life clients – you’ll always have to put in some work. Modern technological solutions can make us stronger and more effective when it comes to this work, but they can also handicap us. A healthy balance of these modern solutions and old-school work ethic will keep you on the right side of the market and moving forward.